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© 1978 by Mrs Raymond G. Bressler and Richard A. King.
PART
I
PROLOGUE
© 1978 by Mrs Raymond G. Bressler and Richard A. King.
© 1978 by Mrs Raymond G. Bressler and Richard A. King.
chapter
/ 1
THE AMERICAN ECONOMY:
COLONIAL DAYS THROUGH
THE CIVIL WAR
This Prologue consists of three chapters. The first chapter traces the
changes in the American economy from the early settlement through the
Civil War. The second chapter discusses the development of an advanced
economy over the past century. The third chapter emphasizes the interdependence of economic activities and sketches briefly the interregional
and international commodity flows that characterize mid-century America.
Economic theory is not only more palatable but also better understood
when well mixed with examples that are relevant to the student. It is
hoped that a review of development and regional specialization in the
United States will provide a useful background for the theoretical models
that constitute the main body of this book. However, Part I is not a
prerequisite for an understanding of the material that follows. It may be
omitted where time is a limitation, where students have a good grasp of
the process of the growth of the American economy, or where examples
drawn from another setting are more appropriate. This review is necessarily brief and incomplete but suggestions for additional reading have
been provided for those students who wish to pursue in more depth some
of the ideas that are presented.
© 1978 by Mrs Raymond G. Bressler and Richard A. King.
4
PROLOGUE
1.1 THE COLONIAL POWERS IN NORTH AMERICA
From the beginning of the 16th century through the 18th century, the
major European powers engaged in a struggle for colonial control of the
North American continent. The drive for colonies had many motives, but
central among them were economic considerations. Spain's great explorers of the late 15th century were searching for new routes to India
and the Orient—routes that would circumvent Arabian control of the
profitable trade in spices, silk, and gold. With the discovery of the Americas, objectives turned to the monopolization of trade and, under the
mercantilist philosophy, the development of colonies that rounded out
supplies of raw materials and guaranteed overseas markets within largely
self-sufficient empires.
Spain's approach was primarily through military conquest, with
plundering and exploitation to obtain gold and silver for the mother
country. France moved largely by infiltration, developing friendly relations with many native tribes and capitalizing on the rich fur trade.
England, on -the other hand, began its colonization in North America
through an extension of its fishing activities in the Grand Banks south of
Newfoundland, coupled with a continuing search for a passageway
through or around North America to northern China. Prominent, too, was
the hope of developing important raw material sources and markets for
manufactured goods. British long-range policies, therefore, contemplated
several stages of development: (1) the establishment of outposts for
exploration and experimentation; (2) the shipment of readily obtained
native materials such as fish, furs, herbs, minerals, and naval stores; (3) the
settlement of agricultural communities to produce sugar, wine, hides, and
dyes; (4) the further development of industries based on forest and mineral
resources; and (5) the eventual creation of a significant market for manufactures—especially woolen cloth —among the colonists and the Indians.
Spain led the race for American possessions by establishing a stronghold at Haiti at the beginning of the 16th century. From here the conquistadores spread out, and by 1536 they had established themselves in
Puerto Rico, Jamaica, Cuba, Mexico, Peru, Bolivia, and Florida. In
North America, however, they did not penetrate far inland, and their hold
over these colonies by the end of the century depended mainly on sea
power. This was broken by the English and Dutch in 1588 with the
destruction of the Spanish Armada. But Spain continued to be an important colonial power in the New World, especially in South and Central
America. In North America, its missions and settlements were pushed
north of the Rio Grande and along the Pacific Coast to San Francisco
until it was halted in 1821 by Mexico's declaration of independence.
© 1978 by Mrs Raymond G. Bressler and Richard A. King.
THE AMERICAN ECONOMY
5
With the seas cleared of the Spanish threat, France and England began
a struggle for domination of North America. The French mounted a
two-pronged attack-along the St. Lawrence River and the Great Lakes
in the north and through the Mississippi River system from the south.
Quebec was established in 1608 and Champlain had reached Georgian
Bay on Lake Huron by 1615. The French policy of friendly relations with
the Indians was largely successful, although Champlain's alliance with the
Hurons against the powerful Iroquois proved to be a costly mistake in
later conflicts between the French and the English. La Salle began his
expeditions up the St. Lawrence and through the Great Lakes in 1669, by
1680 had reached the headwaters of the Mississippi, and within two years
had moved down to the Gulf of Mexico. Outposts were established
throughout all of this region by 1700, and the "west" was definitely
French. Shortly thereafter, the Acadians were settling in Nova Scotia,
Cape Breton Island, and the Gulf of St. Lawrence, and by 1755 the population of these settlements numbered approximately 9000. Meanwhile,
the southern approach was not neglected: Fort Biloxi was established in
1699, New Orleans in 1718, and by 1731 the Louisiana country had a
population of about 7000 Frenchmen. Mention should also be made of the
migrations of the French Huguenots, especially after the Edict of Nantes
in 1685. These Protestants were not welcome in the French colonies,
however, and so for the most part served to swell the migration from
England and the Low Countries to the British colonies.
After experiments during the 1580's in Newfoundland and North
Carolina, England established its first permanent American colonies in
Virginia in 1607 and Massachusetts in 1620. By the middle of the century,
these settlements stretched in an almost continuous line along the Atlantic
coast. With British stress on the colonies as sources of agricultural products and other raw materials and as markets for English manufactured
goods, a policy of permanent settlement and of population growth was
essential. This policy was implemented by aggressive promotional
schemes emphasizing economic opportunity and political and religious
freedom.
However, the Navigation Acts of 1651, 1660, and 1663 imposed
three major restrictions on the American colonies. First, all trade between
England and America had to be carried in English or colonial ships with
English or colonial crews — this barred foreign ships from colonial ports.
Second, all colonial imports, except wine and salt from southern Europe,
had to come from England—this assured the colonial market for English
traders and manufacturers. Third, certain colonial products that were
enumerated or listed could be shipped only to England—this was designed
to give England the products needed to round out her own economy, and
© 1978 by Mrs Raymond G. Bressler and Richard A. King.
6
PROLOGUE
also to give English traders the profits from reexporting surpluses to other
European markets.
The number of settlers increased rapidly, and England soon had more
settlers in North America than any other power. By 1750, the population
of the English colonies exceeded 1,200,000, while France had managed to
settle only 80,000. Growing rivalry and conflict with the French for the
fisheries and fur trade were finally resolved by military power, with
England the victor. By the Peace of Paris in 1763, France ceded Canada
to the English and relinquished claims to territory west to the Mississippi
River. By this same treaty, French claims beyond the Mississippi
(including the Louisiana settlements and New Orleans) were turned over
to Spain. As part of the implementation of the treaty, Britain deported
approximately 6000 Acadians to the colonies to the south.
1.2
THE AMERICAN COLONIAL ECONOMY
Development of the English colonies, like the exploitation of the westward-moving frontier in the generations to follow, was in essence a
gigantic speculation in natural resources. Here was a virgin and largely
unexplored territory, with untold potential in terms of rich farming lands
and mineral and forest resources. But to acquire value, these resources
needed to be developed and connected with markets, and this required
massive investments of capital and labor. To attract these investments,
there had to be prospects of profits to pay returns on capital and to provide
labor income for^he purchase of European goods essential to existence as
well as to a hoped-for increase in living standards in America. This meant
that the colonial ventures needed exportable surpluses of goods keyed to
the demands of European markets. Also, they had to contribute a maximum amount to their own subsistence and, especially in the early stages,
to devote perhaps half of their energies to the creation of new capital
through land improvement.
The dominant characteristic of colonial enterprise was its dependence
on agriculture - perhaps 90 percent of the colonists made their living from
farming, supplemented as well as possible by hunting and trapping, and
this pattern persisted throughout the colonial period. Moreover, there was
a high degree of economic self-sufficiency, with most households growing
a large proportion of their food supplies and also weaving cloth, making
clothes, curing meats, and carrying on crude manufacturing operations.
Commercial agriculture soon developed, however, if defined in terms of
the production of exportable surpluses. In this development, the production and trade patterns varied widely among the southern, middle, and
northern colonies.
© 1978 by Mrs Raymond G. Bressler and Richard A. King.
THE AMERICAN ECONOMY
7
The tidewater regions of the southern colonies were well suited to
large-scale farming, and soil and climate favored the production of crops
such as tobacco, rice, and indigo. Commercial production quickly
developed through the plantation system, with crops loaded directly on
ships for the English market. England wanted these crops, so most of the
products of the southern colonies were enumerated under the Navigation
Acts. The South was thus restricted in its choice of markets, but it was
able to build up a profitable "shuttle" trade with England by exchanging
farm products and naval stores for British goods usually with a favorable
balance of trade (Table 1.1). These colonies fit well into the British empire
scheme, supplying needed products with surpluses for profitable reexport
to other European markets. Tobacco was especially important and dominated exports in the colonial period. The southern colonial planters complained because the channeling of their crop through England returned
them only a fraction of the world market price, but they also profited from
the prohibition of tobacco production in southern England and from
bounties paid on indigo and naval stores.
The middle and northern colonies needed the manufactured goods of
England, but produced few products demanded by the mother country.
Shipments to England included items such as furs and potashes from the
middle colonies and masts and complete ships from New England. Fortunately, markets for the major products of these colonies were available
in the "sugar islands" of the West Indies, where specialization on sugar
Table 1.1 Commerce of American Continental Colonies with England, 1701
to 1710 and 1761 to 1770a
1701 to 1710
Region
1761 to 1770
Exports
Imports
Balance
Export:s
New England
Middle-Atlantic
Southern
37
22
219
86
37
150
-49
-15
+ 69
113
97
834
358
644
793
-245
-547
+ 41
Total
278
273
+5
1044
1795
-751
Imports Balance
^Source. Summarized from data reported by Robert C. Albion, "Colonial
Commerce and Commercial Regulation," in Harold F. Williamson (Ed.), Growth
of the American Economy, Prentice Hall, Inc., Englewood Cliffs, N.J., second
edition, p. 48, 1951. Albion indicates that his data were compiled from D.
Macpherson, Annals of Commerce, passim, and from J. S. Homans, Historical
and Statistical Account of the Foreign Commerce of the United States (1857),
pp. 6-7. Expressed in thousand pounds sterling
© 1978 by Mrs Raymond G. Bressler and Richard A. King.
8
PROLOGUE
production had been carried to the point that imports of foods, horses, and
lumber products were required. This gave rise to multilateral or triangular
trade, the returns from which offset the unfavorable direct balances of the
northern colonies with England. The middle colonies shipped flour and
salted pork and beef to the Islands, while New England's contributions
were fish and lumber. Cargoes of sugar were then moved to England, and
manufactured goods returned to the colonies.
Rhode Island developed its own version of the sugar triangle—rum to
Africa, slaves from Africa to the Islands, and molasses to Rhode Island to
make more rum. At the peak of the rum and slave trade in 1763, about
150 vessels were bringing 14,000 hogsheads of molasses annually to 30
distilleries in Rhode Island —much of this from non-English sources to
avoid payment of the duty. Other trade triangles linked the colonies with
Spain and Portugal, permitted by the Navigation Acts for nonenumerated
articles: fish, flour, and staves for wine casks were shipped to southern
Europe with return trips through England or, perhaps, direct to the
colonies with salt and wine. Finally, a coastal trade connected the tidewater regions of the colonies themselves, with movements of flour and
livestock from the middle colonies, fish and lumber from New England.
Economic enterprise in the colonies was by no means limited to farming and foreign trade. Local communities were developing a considerable
degree of specialization through craft shops, saw mills and grist mills,
breweries and distilleries, and even iron furnaces. Near the end of the
colonial period, real industries were developing. Mention has been made
of shipbuilding; the colonies built 24,000 tons of sailing vessels in 1771
and by the Revolutionary War approximately one-third of all vessels in
the British registry were of colonial build. Shoemaking and the textile
industry developed under the "putting-out" system, with materials
supplied to home workers. Blast furnaces, paper mills, tanneries, and
glass works were not only established but were growing in size. These
activities came increasingly in conflict with British policies, as did the
competition of New England fishing fleets and the growing evasion of the
Navigation Acts by colonial ships and traders. A series of new acts and
proclamations attempted further to restrict colonial trade, to limit industrial development, and to prevent the expansion of the frontier beyond the
Appalachian Mountains. They led to colonial agreements to boycott
imports of British goods and, finally, to war.
1.3
TERRITORIAL EXPANSION OF THE NEW NATION
Open hostilities between England and the colonists started at Lexington
and Concord in April of 1775, and on July 4th of the following year the
© 1978 by Mrs Raymond G. Bressler and Richard A. King.
THE AMERICAN ECONOMY
9
members of the Continental Congress signed the Declaration of Independence. By 1778, the new United States had enlisted the aid of a number of European powers, particularly, through the treaty of alliance with
France against England and the formation of the League of Armed
Neutrality by Russia, Prussia, Denmark, Sweden, and Portugal to resist
British sea power. The fighting ended with the defeat of the British at
Yorktown in 1781, although the war was formally terminated with the
signing of the Treaty of Paris in 1783. By this treaty, England granted the
United States independence and title to all lands west to the Mississippi
River and north to the Great Lakes. Spain still claimed Florida, the Gulf
Coast, and the lands west of the Mississippi. Spanish control of the mouth
of the Mississippi restricted the development of river traffic and trade with
the region west of the Appalachian Mountains, but this was corrected by
the Pinckney Treaty of 1795.
The United States thus controlled a far larger territory than it was
immediately able to exploit. France had ceded the Louisiana territory to
Spain after the French and Indian War, but Napoleon regained possession
in 1800. This vast region was added to the United States through the
Louisiana Purchase in 1803. English claims to the Red River basin in
what is now Minnesota and North Dakota were relinquished about 1818.
In the following year, Spain ceded Florida and a coastal strip in Louisiana.
Russia, which had been developing the fur trade in Alaska and down the
Pacific coast into California, agreed in 1824 to stay north of 54° 40'. The
treaty of 1842 with England settled the northeastern boundary between
the United States and Canada.
Meanwhile, Mexico had declared its independence from Spain in
1821, and Texas in turn gained its independence from Mexico in 1836.
The Texas territory was annexed by the United States in 1845. In the
northwest, the Oregon compromise of 1846 fixed the western boundary
between the United States and Canada. Mexico ceded the southwestern
territory including California in 1848, and the Gadsden Purchase (a small
strip of land in southern Arizona) rounded out the borders of the nation
in 1853.
The settlement of this vast territory was a much slower process, of
course, involving exploration, the pushing back of the Indians, the growth
and migration of population, the clearing and improvement of the land,
and the development of transportation and marketing systems. At the end
of the colonial period, the frontier of settlement followed the eastern
slopes of the Appalachian Mountains with minor extensions through the
Cumberland Gap to the Kentucky-Tennessee territory and through Pennsylvania to the Ohio River. The rough mountain country created an almost
insurmountable barrier to transportation, and the bypassing of this
© 1978 by Mrs Raymond G. Bressler and Richard A. King.
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PROLOGUE
barrier by "water-level" routes was blocked by the warlike Iroquois
Indians in western New York and by the no less formidable Cherokees in
the Georgia-Alabama district. But these restraints were overcome as the
irresistable flood of population spilled over into the western territory.
By 1815 the frontier (defined as a settled population of two persons
per square mile) had pushed well into eastern Ohio and down the Ohio
River to the Wabash. Migration through the Cumberland Gap had settled
Kentucky and much of Tennessee. To the south the Indians were still
troublesome, but most of Georgia and the northern part of Alabama had
been won. Also, the Louisiana Purchase had added an important southern
beachhead that spread out from New Orleans (Figure 1.1). By 1840, the
frontier was in southern Michigan and Wisconsin and, generally, extended
across the first tier of states west of the Mississippi River. Progress
through the Civil War period was relatively slow, but the frontier moved
across Iowa and into eastern Nebraska, Kansas, and Texas. The gold rush
created a rapidly growing population in California, and a new frontier was
pushing eastward from the Pacific coast.
The twenty-five years from 1865 to 1890 carried agriculture into the
semiarid prairie country and brought the settlement of Oregon and the
Northwest. This was the period of rapid disposal of the Public Domain—
through sale at low prices, through "free land" under the Homestead Act
•
•
minim
vww
=
1790
1815
1840
1865
1890
FIGURE 1.1 The moving frontier and the admission of states. (Based on Report of the
Director of the Census, 1890.)
© 1978 by Mrs Raymond G. Bressler and Richard A. King.
-THE AMERICAN ECONOMY
11
of 1862, and through land grants to the states for the support of education
and to the railroads for their development. By the end of the 19th century,
the government had no more good land to give away and the frontier
period had come to an end. There remained large areas in the mountain
states where population density was less than two persons per square
mile. With limited economic opportunities, low population density has
persisted in much of the intermountain area of the West until the present
time.
With minor departures, such as the creation of West Virginia by the
subdivision of Virginia in 1863, the formation of states closely followed
the advancing frontier (Figure 1.1). The original thirteen states had ratified
the Constitution by 1790, and by 1820 all states east of the Mississippi
except Florida and Wisconsin had been admitted. Approximately 100,000
gold miners provided the basis for admitting California in 1850. Most of
the mountain states were admitted about 1890, and the process was
completed when Arizona and New Mexico became states in 1912.
The expansion of the frontier of settlement and the formation of states,
however, by no means indicate the complete development of available
resources. The westward movement was primarily agricultural, but only a
small portion of the farmland was developed as the frontier advanced.
This may be illustrated by comparing the improved land in farms in 1850
with the total cropland in 1950 (Figure 1.2). In the region between the
original states and the Mississippi River, only 36 percent of the present
cropland was improved in 1850, while in the first tier of states west of the
river the ratio was less than 10 percent. Also, western competition resulted
in decreases in cropland between 1850 and 1950 of more than 60 percent
in New England and more than 20 percent in the New York to Virginia
region.
1.4 TRANSPORTATION AND COMMUNICATION
At the close of the Revolutionary War, the United States found itself with
a fairly well developed water transportation system along the coast and
navigable rivers. Inland transportation was difficult and expensive, however, for the road network was little more than a collection of trails for
pack horses and cattle. Where over-the-road transportation was available,
service was slow and undependable.
With high freight costs, trade movements between inland points and
seaports were limited to concentrated and valuable products such as furs,
gunpowder, iron, salt, and whiskey. Animals provided their own transportation, and so could be moved economically for relatively long
distances. Cattle and hogs were driven from west of the mountains in
© 1978 by Mrs Raymond G. Bressler and Richard A. King.
12
PROLOGUE
FIGURE 1.2 The improved land in farms in 1850 as a percent of 1950 cropland.
[Calculated from data in Reports of the United States Bureau of the Census. ("Less
than one-half of one percent.)]
Ohio, Kentucky, and Tennessee to Baltimore, Philadelphia, and New
York, and this practice continued well into the 19th century until the
railroads served these areas and meat-packing developed along the Ohio
River.
Several attempts were made to commit the federal government to a
program of improved transportation—including the proposals of Secretary of the Treasury Gallatin and the "Bonus Act of 1816" —but they
were rejected on constitutional grounds or because of diverse sectional
interests. For the most part, road building was left to private initiative or
to the states. Pennsylvania led the way by chartering private companies to
construct toll roads. The success of the Philadelphia-Lancaster Turnpike
— completed in 1794 and the first surfaced road in the Nation—led to the
creation of literally thousands of such corporations. Private construction
and operation under state charter and with supervision of tolls was typical
in Pennsylvania and the states to the north, although in the southern
states the fear of exploitation by private monopolies led to highway
development by state and local governments. The federal government
finally participated by constructing the National Pike or Cumberland
Road from Cumberland Maryland to Wheeling in what is now West
Virginia; this route was to connect with the Mississippi River at St. Louis
© 1978 by Mrs Raymond G. Bressler and Richard A. King.
THE AMERICAN ECONOMY
13
and, actually, was extended as far as Vandalia, Illinois. These activities
eventually linked together the eastern and northern states by a system of
surfaced roads. By 1820 nearly 10,000 miles of surfaced roads had been
completed, and this increased to 64,000 in 1840 and 88,000 in 1860.
A number of canals were constructed by private enterprise in the
early years of the 19th century, but in 1817 the state of New York entered
the field and began the construction of a comprehensive system connecting the Hudson River with Lake Champlain, with Lake Ontario, and with
Lake Erie. The Erie Canal extended 363 miles from Albany to Buffalo,
surmounting an altitude of 500 feet with 84 locks. When completed in
1825, the canal reduced the time required to move freight between
Buffalo and New York City from 20 to eight days, and cut freight charges
about 90 percent. It was an immediate financial success, and low-cost
access to the hinterland did much to develop New York as the dominant
city and seaport of the Atlantic Coast. By the same token, it was an
immediate stimulus to commercial agriculture — and to land values — in the
Great Lakes area, and the western competition profoundly influenced the
agriculture of the Northeast.
Success of the Erie Canal coupled with the rivalry among New York,
Philadelphia, and Baltimore as leading ports soon brought Pennsylvania
and Maryland-Virginia into the canal-building ventures. The Pennsylvania Canal connected Philadelphia with the Ohio River at Pittsburgh in
1834 by a route that crossed the Allegheny Mountains at an elevation of
2300 feet.
The Chesapeake and Ohio Canal was the third major attempt to reach
the West by canal. It was completed only to Cumberland over a route that
covered 184 miles-with 73 locks and had a maximum elevation of 609 feet
Meanwhile the Lake states and especially Ohio were completing a series
of canals that joined the Ohio and Mississippi Rivers with the Great
Lakes. By mid-century, the United States had nearly 4000 miles of canals
in operation. But by that time the railroads were emerging as the major
factor in inland transportation. Even the successful Erie Canal was
surpassed by the railroads in volume of freight handled in New York by
the end of the Civil War.
The first railroad in the United States was built in 1826 to haul stone
for the Bunker Hill monument; the first common carrier was the Baltimore and Ohio Railroad, started in 1830. These and other early railroads
were horse-drawn, but within several years steam was the universal
traction power. Rail mileage increased to 2800 in 1840 and to 9000 in
1850. Early lines were built to complement water transportation, but the
superiority of rail service was soon evident, and the building of a major
network began. Track mileage increased to 31,000 by 1860 and to 53,000
© 1978 by Mrs Raymond G. Bressler and Richard A. King.
14
PROLOGUE
by 1870. By the end of the Civil War, there existed a fairly comprehensive
rail system in the "northern states west to the Mississippi. The war had
retarded construction in the South, but even there the major components
of a network had been built. Finally, in 1869, a line was pushed across the
continent to San Francisco.
The development of the system in this period and in the decades to
follow was greatly stimulated by federal and state aid, particularly in the
form of land grants. Between 1850 and 1871, when the practice was
discontinued, the federal government granted nearly 160,000,000 acres of
land to the railroad companies; approximately 130,000.000 acres were
eventually patented by the railroads. In return for these grants, the companies agreed to construct roads in designated territories, primarily in the
South and the West, and they also gave the government preferential rates
on mail, troops, and government property.
The growing railroads by no means displaced coastal trade and inland
water commerce on the Mississippi River and the Great Lakes. In 1807,
Fulton's Clermont demonstrated the practicality of steam power for water
transportation. The Pinckney Treaty with Spain in 1795 had opened up
the Mississippi as a major trade route for the central regions of the United
States, but this was almost entirely one-way, downstream traffic. However, the exploitation of steam power changed this and also greatly
speeded the movement of traffic: the time from Louisville to New Orleans
was reduced from 25 to less than five days. The first steamers were operating on the Mississippi shortly after 1810. and it has been estimated that
500 to 600 steamers were on the river by 1850. About 70 percent of
outbound traffic from the Midwest flowed through the Mississippi system,
while the balance went east by canal, railroad, and highway. Imported
products were less bulky and more valuable, and riverboats handled
considerably less than half of this trade. Meanwhile, coastal trade continued to expand and by the middle of the century still far exceeded the
combined commerce of canals, railroads, and riverboats. The total gross
tonnage of vessels in coastal and internal trade exceeded that in American
foreign commerce in 1831 and remained well in the lead until World War
I. In 1860, as a result of the growth of regional specialization and the rise
of New York as the leading port, the value of commodities in the coastal
trade was six times the value of American foreign trade.
Even a brief discussion of American transportation must mention the
western trails, since they carried the bulk of the pioneers and early settlers.
Routes through the Appalachian Mountains have already been described;
there were several trails through western Pennsylvania and Maryland to
the Ohio River and the "Wilderness Road" through Cumberland Gap to
Kentucky and Tennessee. They were well developed by the end of the
© 1978 by Mrs Raymond G. Bressler and Richard A. King.
THE AMERICAN ECONOMY
15
colonial period but were little used until the westward migrations after
the Revolutionary War. As the frontier pushed across the Mississippi
River, the great trails extended to the Far West. The Santa Fe Trail from
St. Louis to New Mexico was developed during the 1820's as American
traders began to supply the Spanish-Mexican outpost at Santa Fe (Figure
1.3). Later this was extended to southern California as the Spanish Trail.
The first large migrations of settlers by the Oregon Trail came in the
1840's, and by the end of that decade the gold rush had created the
California Trail as a southern branch. Salt Lake City was founded in 1847
and the Mormon Trail, roughly paralleling the Oregon Trail, brought
settlers to the Utah area. Finally, the Butterfield Overland Mail swung
south near the Mexican border: coaches carried mail and passengers to
California in 25 days, until the trail was made obsolete by the completion
of the transcontinental railroad in 1869.
Not all of the trails were for settlers, since many famous routes developed as cattle paths. Cattle droving was common practice in the
colonies, and many special trails or roads were developed for this purpose.
An example is the Ten Rod Road in Rhode Island —a tract 165 feet wide
that extended from the western part of the colony to the Narragansett
Bay. Cattle and hog drives across the Appalachian Mountains to the
FIGURE 1.3 The gateways through the Appalachian Mountains, and the Great Western
Trails. (Based primarily on Philip M. Overmeyer, "Westward Expansion before the
Homestead Act," in Harold F. Williamson (Ed.), Growth of the American Economy,
Prentice-Hall, Inc., Englewood Cliffs, N.J., second edition, 1951, p. 94.)
© 1978 by Mrs Raymond G. Bressler and Richard A. King.
16
PROLOGUE
seaports were well established in the early 19th century. But it remained
for Texas to develop the major trails of the 19th century, a good example
of a frontier region reaching for adequate markets.
Cattle were first introduced north of the Rio Grande in the 1580's. The
early Texas settlers from the United States crossed the "native" cattle
with stock imported from northern Europe to develop the famous longhorned steer. It is estimated that there were more than 300,000 cattle in
the area when Texas was admitted to the Union. They had increased to
1,400,000 in 1855 and to 3,800,000 in 1860. But the country was cattlepoor, since there were few markets except for hides and tallow. Sporadic
drives were made between 1842 and 1861 in search for buyers in New
Orleans, Shrevesport, and even in Ohio and New York. Several herds
were driven to California during the gold rush; steers worth $10 in Texas
brought $30 in California. Herds were also driven east to the Mississippi to
provision the Confederate army until Grant captured Vicksburg in 1863.
The big drives started after the Civil War, and in the early years the
movements were to railhead points in Kansas for shipment to markets and
to the growing Union Stock Yards at Chicago. As the railroads were
extended and as crop agriculture became established and forced the trail
herds to the west, the major markets moved from Sedalia to Abilene, to
Ellsworth, to Newton, to Wichita, and finally to Dodge City (Figure 1.4).
Abilene was the northern terminus of the Chisholm Trail and between
FIGURE 1.4 The Texas cattle trails. (Based on Paul I. Wellman, The Trampling Herd,
Garrick and Evans, Inc., New York, 1939.)
© 1978 by Mrs Raymond G. Bressler and Richard A. King.
THE AMERICAN ECONOMY
17
1867 and 1871, approximately 5,000,000 head of cattle passed through
this outlet. Dodge City was the major center from 1875 to 1885-as a
railhead shipping point on the Santa Fe Railroad, as the headquarters for
the buffalo hunters and, finally, as a major point on the Dodge CityWestern Trail along which moved stocker cattle for the range in the
Northwest territory. Probably 6,000,000 head of cattle and horses moved
north through Dodge. Total shipments from Texas between 1867 and
1890 are estimated at 12,000,000 head with a total value of $250,000,000.
The economic incentive behind these trail drives was direct and simple.
Cattle could be bought in Texas for $5 to $10 per head and sold at the
market or railhead for $20 to $30. A drive from Texas to Montana would
cover 3000 miles and take about six months'-at a cost of about $1 per
head. This left a profit sizable enough to fill the trails in spite of the risks
of floods, blizzards, and the Comanche and Sioux Indians. Herds kept
moving north until the frontier was closed and the land was covered with
wheat ranches and fenced ranges.
The importance of communications was recognized in the Constitution, and Congress was given power to improve the postal service. A
dependable mail service required dependable transportation, however, so
improvement came slowly. Letter rates amounted to eight cents for 30
miles in 1820, but they were reduced to five cents for 300 miles by 1845
and to three cents for 3000 miles by 1851.
During this period, Samuel Morse invented the telegraph and in 1844
the first experimental line was completed between Washington and Baltimore. Telegraph lines connected New York with Chicago and Washington with New Orleans in 1850. In 1861, the first transcontinental line was
completed and the first trans-Atlantic cable was laid. Immediately after
the Civil War, the Western Union Company had 46,000 miles of pole
lines and cables, 85,000 miles of wire, 2600 offices, and carried on an
annual business in excess of $6,500,000.
The transportation and communication systems were far from complete, but substantial progress had been made in tying together the Nation.
Dependable and low-cost mail service was a reality, and the telegraph
provided almost instantaneous communications among all parts of the
United States and with Europe. The transportation system of surfaced
highways, canals and improved inland waterways, and railroads served
all parts of the northeastern quarter of the country and was being extended rapidly in the southern and western sections. Transportation
charges were a small fraction of the costs at the beginning of the 19th
century (Table 1.2). From the standpoint of economic development, it
was now possible to know of market opportunities, and it was economical
to ship raw materials and finished products for long distances.
© 1978 by Mrs Raymond G. Bressler and Richard A. King.
18
PROLOGUE
TABLE 1.2 Approximate Freight Rates in the United
States during the 19th Century3
Type of
Transportation
Road
Canal
Coastal
Railroad
Period
Freight Rates or Costs
Cents per Ton-Mile
1800 to 1810
1825 to 1840
1825 to 1840
1800 to 1825
1840
1855
1865
1880
1890
20 to 40
10tol5
1 to 3
1 to 2
4 to 10
3
1.5 to 2
1.2
0.9
"Based on fragmentary reports from a variety of sources.
1.5
THE GROWTH OF ECONOMIC SPECIALIZATION
As settlement pushed westward, areas on the frontier evolved through a
rather typical sequence. First came the hunters, explorers, fur traders,
and the missionaries. Then came the "professional" pioneers — fighting
Indians, clearing small plots for corn, and raising a few cattle. They were
followed by the farmers, who frequently bought out the pioneers and
settled down to occupy and to improve the land on a subsistence-farming
basis. Villages developed as more settlers came to the area, and economic
specialization had its start. Farming was by far the dominant occupation
and a considerable degree of self-sufficiency persisted. But each community had men who specialized in the handcrafts (cabinetmaking,
blacksmithing, harness and shoemaking) as well as millers, carpenters,
printers, teachers, and merchants. In the days of high transport cost, each
inland community was largely self-sufficient, and commercial contacts
among these communities and with the seacoast was not extensive.
Improving transportation made specialization possible on a larger scale
and, by the mid-19th century, there was growing competition between
"local" and "imported" products. Flour provides an excellent example:
when local wheat production was important, flour making was in the
hands of small grist mills. As transportation opened the western lands,
wheat production moved more and more to the Great Lakes, large milling
companies developed, and most eastern communities obtained their
supplies from the west. By the Civil War, the monopoly of small industries
in local markets had largely disappeared except in storekeeping and the
service trades.
© 1978 by Mrs Raymond G. Bressler and Richard A. King.
THE AMERICAN ECONOMY
19
The growth of economic specialization during this period can best be
summarized by considering the changes that were taking place in population and in employment. In 1790, only five percent of the population lived
in urban communities with populations in excess of 2500 inhabitants;
perhaps 90 percent of total gainful employment in the United States was
in agriculture. By 1870,26 percent of the population was urban and nearly
half of the gainful employment was in nonagricultural lines. Data on the
distribution of nonagricultural employment are not available for the earlier
period, but in 1870 approximately 21 percent of the employed persons
worked in manufacturing, the hand trades, and construction, 10 percent
were involved in transportation and trade, and 13 percent in domestic and
other service occupations. In terms of private income realized from production, the proportions originating in agriculture declined significantly
from 40 percent in 1799 to 24 percent in 1869, while the proportions from
manufacturing, trade, and service occupations increased. These changes
are typical of growth in an advancing economy.
The effective British blockade during the War of 1812 did much to
stimulate manufacturing in the United States. These new industries found
it difficult to meet intense foreign competition following the War, however,
and this led to the first protective tariff in 1816. Duties on imported goods
averaged 20 percent, and rates were raised still further by 1833. The
southern states were primarily interested in export markets for their
major agricultural products rather than in manufacturing and, hence,
generally opposed high tariffs. These differences in sectional interests
resulted in rate reductions in 1833, increases in 1842, and reductions in
1846 and 1857. Duties averaged about 19 percent in 1861, but with
southern opposition made ineffective by the Civil War, rates were raised
to an average of 47 percent in 1864. With a growing and protected domestic market, manufacturing developed rapidly in the northern states and,
especially, in the Northeast.
Iron smelting had developed in the early colonial period, but furnaces
used wood and charcoal for fuel and were small in scale until the 1820's.
The period from 1830 to 1870 saw a tenfold increase in the output of pig
iron while coal production increased from virtually nothing to more than
33,000,000 tons per year. Textile mills were established in New England
at the turn of the century, and soon they were producing cotton as well as
woolen cloth. By 1860, more than 5,000,000 cotton spindles were
operating, utilizing 845,000 bales or 22 percent of United States cotton
production.
Agriculture was also keyed to the "industrial revolution" by becoming
more specialized and commercialized. The urban and industrial population provided a growing market. In fact, the production of food supplies
© 1978 by Mrs Raymond G. Bressler and Richard A. King.
20
PROLOGUE
and agricultural raw materials were essential to industrial growth. The
states in the Great Lakes region and the upper Mississippi Valley became
the major grain producers (Figure 1.5). Livestock production moved to
the rangelands, with "feeder" cattle often shipped from the range to the
grain belt for fattening and finishing for market. Productive western lands
and low freight rates forced northeastern farmers to turn to perishable and
bulky products where closeness to urban markets gave them a real advantage - milk and dairy products, eggs, fruits and vegetables, and hay for the
horses used in city transportation. The margin of cultivation in the
Northeast retracted after 1850, and many acres that had been used as
cropland reverted to forests.
Western competition was also a major influence on southeastern
agriculture. Tobacco continued to be an important cash crop for foreign
and domestic markets, but production increased little between 1800 and
1850. Indigo had been an important crop before the Revolution, but it
disappeared quickly with the removal of the British subsidy. The big
O 1850
-«-1870
FIGURE 1.5 The changes in the geographic centers for population, farm production,
and manufacturing, 1850 to 1870. {Source. Population centers from Statistical Abstract
of the United States, 1956.)
© 1978 by Mrs Raymond G. Bressler and Richard A. King.
THE AMERICAN ECONOMY
21
change came in cotton after Eli Whitney invented the gin in 1793. Production expanded rapidly to meet the demands of European and domestic
markets-from less than 100,000 bales in 1800 to 1,350,000 in 1840 and
more than 4;000,000 bales in 1870. Cotton rapidly depleted the soil,
however, and soon the southeastern states were being displaced by new
lands in Alabama, Mississippi, and Texas. With little opportunity to shift
to market crops for the few urban centers in the area, agriculture declined
while land eroded and was abandoned.
1.6
THE SITUATION AT THE CLOSE OF THE CIVIL WAR
In 250 years the American settlements had grown from a handful of
isolated colonies clinging to the Atlantic Coast to a nation stretching from
the Atlantic to the Pacific with a population of 35,000,000. Although still
an agricultural economy, farm employment had declined to less than 60
percent of total employment. Manufacturing, construction, and trade
were contributing increasingly large proportions to the national income.
The transportation network had been developed through interconnected
systems of highways, waterways, and railroads in the northeastern
quarter of the country, and was rapidly expanding in other sections.
Inland transportation costs (the big barrier to western growth and to
interregional trade) had been reduced from 20 to 40 cents per ton-mile in
the days of primitive roads to one to two cents per ton-mile on canals and
railroads. Communication by mail and telegraph was helping to tie the
country together and—through greatly improved information—was
contributing to the growth of a market economy.
Agriculture had moved into the fertile lands of the Midwest, and
regional specialization was developing to take advantage of favorable soil,
climate, and location factors. Farm mechanization was underway, making
more effective use of human and animal power. Household industries
declined as farmers purchased more and more of their clothes, tools,
furniture, and even food with money obtained from the sale of "cash"
crops. Industrial cities were growing, particularly in the Northeast, and
the migration of excess population from farms to cities and manufacturing
occupations had started. International trade, though important, had declined somewhat in relative terms and was beginning to show the patterns
characteristic of industrial instead of agricultural economies —increased
imports of raw materials and exports of manufactured articles.
The stage had been set for this interrelated development of industry
and commercial agriculture early in the 19th century. The United States
had an abundance of unexploited natural resources, the necessary tech-
© 1978 by Mrs Raymond G. Bressler and Richard A. King.
22
PROLOGUE
nology was being created by the industrial and agricultural revolutions,
and the population and the labor supply were growing rapidly. This
development would have been impossible, however, without the simultaneous advance of transportation, communication, and of the many
occupations that make up the marketing system. By the close of the Civil
War, these facilitating industries had been greatly improved and the evolution of a market-oriented enterprise economy was well under way.
SELECTED READINGS
The Early American Economy
Adams. James Truslow, Provincial Society. 1690-1763. The Macmillan Company. New
York. (1927).
Bidwell, Percy W. and John I. Falconer, History of Agriculture in the Northern United
States. 1620-1860. Carnegie Institute of Washington, 1925 (Peter Smith. New York.
1941).
Bragdon. Henry W. and Samuel P. McCutchen, History of a Free People. The Macmillan
Company, New York (1954).
Craven, Wesley Frank. The Southern Colonies in the Seventeenth Century, Louisiana State
University Press (1949).
Edwards. Everett E.. "American Agriculture—The First 300 Years," in Farmers in a
Changing World. 1940 Yearbook of Agriculture. USDA. Washington (1940). pp.
171-276.
Gray. Lewis C , History of Agriculture in the Southern United States to I860. Vols. I and
II. Carnegie Institute of Washington (1933). (Peter Smith. New York. 1941).
Jones. Howard Mumford, America and French Culture. 1750-1848. The University of
North Carolina Press, Chapel Hill (1927).
Langdon. William Chauncy. Everyday Things in American Life. 1776-1876. Charles
Scribner's & Sons, New York (1941).
Lewis, Oscar. Sea Routes to the Gold Fields. Alfred A. Knopf, New York (1949).
North, Douglass C , The Economic Growth of the United States, 1790-1860, Prentice-Hall
Inc., Englewood Cliffs (1961).
Parker, William N. (ed.). Trends in the American Economy in the Nineteenth Century.
NBER Studies in Income and Wealth. Vol. XXIV. Princeton University Press,
Princeton (1960).
Wellman, Paul I., The Trampling Herd. Carrick and Evans, Inc., New York (1939).